Many wealthy clients are distrustful of advisors-Beatrice Paez

Many wealthy clients are distrustful of advisors-Beatrice Paez

Many wealthy clients are distrustful of advisors, CFA Institute find

The majority of HNW clients believe the “core value” of advice lies in developing a personalized, goals-driven financial plan, not in investment management

By Beatrice Paez

Although many high net-worth (HNW) individuals seek out professional financial advice, a sizable proportion remains distrustful of advisors and skeptical of their value, a recent report from the Chartered Financial Analysts (CFA) Institute suggests.

The report, entitled The Value of Premium Wealth Management, explores the perspectives of 4,000 mass affluent and HNW individuals and 1,370 wealth advisors. It also looks at the challenges facing advisors as they work to assert their value in a changing financial landscape.

Of the wealthy individuals surveyed, 25% indicated they have opted not to rely on a wealth manager. Among those who don’t seek advice, the report gives a closer breakdown of the possible factors at play. For example, 60% said they would rather make their own investment decisions and 32% indicated they didn’t believe advisors prioritize clients’ interests ahead of their own.

“As a wealth-management professional, the one characteristic that should define us is our motivation to deliver the most value to our clients,” says John Bowman, managing director of the Americas for the CFA Institute, in a statement. “The challenge for advisors in this environment is to communicate the value of our expertise and technical knowledge to clients while also catering to clients’ specific, real-world needs.”

Other key findings from the poll suggest that 87% of wealthy individuals surveyed believe that the “core value” of wealth management lies in developing a personalized, goals-driven financial plan — not in investment-focused advice and the “direct management” of investments.

The survey also asked those who retain an advisor — including advisors who may or may not hold a CFA designation — about the perceived value the advisor adds in helping HNW clients manage their wealth.

Specifically, 54% reported that their advisor has cut the time and energy these clients have to spend tending to their finances. In addition, 47% believed that their advisor offers them a clear view of the financial decision-making process.

Those figures seem to point to a need for advisors to provide a more “proactive” and “holistic” approach to wealth management, the report notes. That can run the gamut from hosting family discussions on legacy and inheritance issues to developing a philanthropic strategy.

Meanwhile, the CFA finds in its analysis of how advisors view the value of wealth management that more than two-thirds attributed it to “having access to skilled professionals at any time.”

In contrast, when given the same two options, more than half of wealthy individuals surveyed gave more weight to the value of having access to a strong, comprehensive digital offering. This is especially the case for 70% of the millennials surveyed, the report notes, and appears to indicate a shifting perspective of an advisor’s main value.

Still, while adapting to changing technological demands is increasingly important, the report says that digital communications doesn’t supplant, but enhances, the relationship advisors nurture with clients in person.

“We must be open to change, and have the courage to pivot and innovate in order to enhance client relationship,” Bowman says.

The 15-minute online survey, which was conducted from July to December 2016, involved different industry stakeholders such as CFA charter holders, mass-affluent and HNW individuals and wealth advisors without a CFA designation.

Of the 1,370 wealth advisors included, 892 reported they have a CFA certification.